Bank Guarantees

Guarantees can be either direct or indirect:A direct guarantee – occurs when a bank is instructed to issue a guarantee by its account holder, in favour of the beneficiary.

An indirect guarantee – an indirect guarantee occurs when a second bank is asked to issue a guarantee in return for a counter guarantee. In case the second bank suffers losses in the event of claim against the guarantee, the issuing bank indemnifies any losses the second bank suffers.

A breakdown of BG types is provided below:

Bid Bond

Performance Bond

Advance Payment Guarantee

Warranty Bond

Letter of Indemnity (LOI)

Payment Guarantee

Rental Guarantee

Confirmed Payment Order

The bank's guarantee to pay may be subject to conditions which stipulate that bank would be obligated to pay the beneficiary the a fixed promised amount on behalf of its client if the conditions are fulfilled.